We treat the waking state as real and dream state as unreal. ‘Day dreaming’ is used when a person imagines in the waking state. GaudpadAcharya in his karikA on MAndukya Upanishad refutes the ‘unreality’ of dream and shows that the two states are on equal footing.
I Utility
Objection: Dream objects have no utility in waking state.
Refutation: To a dreamer, dream water is useful, not the water in waking state.
II Reality
Objection: Dream objects are unreal because they may not exist in the waking state.
Refutation: Even though dream objects may not be seen in the waking state, yet they are as real to a dreamer as objects in the waking state are to the waking person.

III Imagination                                                                                                     Objection: The dream objects are ideas and imagination which are not perceived by sense organs.
Refutation: Even in the waking state, many things are not accessible to the sense organs. On the other hand, a blind person can see things in a dream with ‘dream eye’.
IV Objective Vs subjective:
Objection: Waking state is objective and public. Dream is subjective and private.
Refutation: For a dreamer, the dream is objective and is shared with the other dream persons.
V Continuity
Objection: The objects in the waking state continue to exist after an interval of time, i.e., there is a continuity across two waking states. There is no continuity between two dreams.
Refutation: The claim of continuity across two waking states is erroneous because it is well known that the worldly (waking) objects keep changing every moment, though the changes may be too miniscule to be perceived by sense organs. Furthermore, the question is who decides the continuity? The mistake in the objection is that the waking person decides the continuity or otherwise and, therefore, it is ‘biased’. A third entity should decide which exists in both the states. Vedanta says that consciousness is changeless and exists across the three states, waking, dream, and sleep. From consciousness standpoint, the objects, whether in waking state or dream state are changing and there is no continuity at all. We assume continuity in the waking state because our sense organs are incapable to perceive the changes.

Conclusion: Both the states are on the same footing. Since, dream state is taken as unreal, the waking state is similarly ‘unreal’. No doubt, both the states are experienced. Shankaracharya calls them mithyA: neither real nor unreal. They are not unreal because they are experienced.

More thoughts
It is true that the waking state constitutes a major portion of a person’s lifetime as compared to dream state. However, it has no bearing on their status. There are two reasons. In the waking state, death of a newly born does not mean that his/her waking life is less real than that of a person who lives for 80 years. That the dream lasts for a short period is from the waking state viewpoint. To a dreamer. the dreamtime may be very long.
Dream experience may be useful in the waking state. A musician may hit upon a composition he has been struggling during waking state. There are reports of pre-monitions during dream about waking state incidents.
A waking person requires physical light for physical transaction. A dreamer does not require an external light. Dream is therefore also called Taijasya.